World Acceptance Corporation

Good morning, and welcome to World Acceptance Corporation's third quarter 2026 earnings conference call. This call is being recorded. At this time, all participants have been placed in a listen-only mode. Before we begin, the corporation has requested that I make the following announcements. The comments made during this conference call may contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that represent the corporation's expectations and beliefs concerning future events. Such forward-looking statements are about matters that are inherently subject to risks and uncertainties, statements other than those of historical fact, as well as those identified by words anticipate, estimate, intend, plan, expect, believe, may, will, and should, or any variation of the foregoing and similar expressions are forward-looking statements. Additional information regarding forward-looking statements and any factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements are included in the paragraph discussing forward-looking statements in today's earnings press release and in the risk factors section of the corporation's most recent Form 10-K for the fiscal year ended March 31st, 2025 and subsequent reports filed with or furnished to the SEC from time to time. The corporation does not undertake any obligation to update any forward-looking statements it makes. At this time, it is my pleasure to turn the floor over to your host, Chad Prashad, President and Chief Executive Officer.

Good morning, and thank you for joining our fiscal 2026 third quarter earnings call. There are a few important aspects of the portfolio to cover in more detail. While we originated 16% more in new customer volume during the quarter, we actually ended the quarter with 25% more outstanding ledger in our active new customers than the same quarter of last year. And our new customers are, again, our riskiest customer segment. This 25% increase in the new customer outstanding portfolio required around an $8 million additional provision for this customer segment in the same quarter last year. The third quarter had the highest new customers since the same quarter of calendar 2021. Already, early performance indicates that these continue to be good investments in line with expectations. Compared to the prior high volume mark of the third quarter of calendar 2021, the first pay defaults are already 19% lower, relatively speaking. In addition, we continue to make credit box improvements on a regular basis. In some cases, those changes are due to credit performance and small credit and geographical pockets. But the majority of improvements in underwriting are to drive a faster return on the initial investment and to increase long-term ROI with our most loyal customers. This is a long-term investment that will continue to improve both credit performance as well as customer retention. When combined, we'll continue to improve long-term yields. As we noted, yields improved 84 basis points year over year, as income has also improved. We expect this trend to continue due to improved rates in a few states, continued discipline with credit limits and underwriting, improving customer retention as longer-tenured customers are also lower risk for us, and continued smart investments in our customer base and overall ledger. Our customer base has grown substantially, around 5.4% organically year over year. To put that in perspective, last year we grew 2.2% year over year and declined in the two years prior to that. One of our largest growth years was in fiscal year 2022 where we experienced a 5.6% increase in our customer base organically. As mentioned earlier, the first pay default rates on our new customers made during the third quarter of this year are already 19% lower, relatively speaking, than new customers of that same year of fiscal 2022. Organic growth in ledger is 2.4% year-over-year compared to a decline of 2.4% last year. Our average outstanding loan has declined around 2.5% in average balance year-over-year. That's due to the increased discipline around our underwriting and larger investments in new customers who are typically at lower balances. Again, this all combines to improve gross yields. Year-over-year earnings comparisons are complicated with the headwinds during this quarter of increased share-based comp expense, personnel expense, as we have temporarily overstaffed to improve our branch team members, investments in new customers, as well as our provision for loan losses. However, we remain committed to the long-term soundness and profitability of the portfolio and operations. We're most excited about putting several years of shrinking the portfolio behind us and continuing to see these gross yields grow. The customer base continues to expand. Customer retention and tenure continue to improve. As one of our largest investments, we continue to be focused on improving branch operations and personal management. This year, we've already repurchased nearly 600,000 shares, reducing our outstanding shares by 11% in the first nine months of the year. We have over $60 million remaining capacity for repurchases, which is approximately 9% of the outstanding shares as of yesterday's closing price, which would be a total of around 20% of outstanding shares this year. As a mid-quarter update, we're very early in our tax filing season, and we've already seen substantial improvement year-over-year in both the volume of filings as well as the revenue. While the current ice storm has affected approximately 10 of our states so far this week, by some portion of their branches being closed, We are optimistic and continue to be optimistic that we'll experience an increase in tax filing volume and revenue throughout this quarter. I'd also like to take a moment to thank Clint Dyer for his incredible contribution to the company over the last 30 years and to celebrate his upcoming retirement. Clint's added tremendous value to our branch leadership over the decades and has produced many of our key leaders under his mentorship. We wish him the best in his upcoming adventures. I'm also grateful to our branch leadership under Clint for their commitment to world and embracing the new style that Tobin Turner has brought in and stepping in to lead branch operations during the transition. Tobin brings his deep knowledge of analytics and marketing as well as retail operations to his approach of the management structure. We are excited about the current portfolio and its trajectory, which again includes substantial customer base expansion, strong loan growth, improved loan approval rates while maintaining credit quality, stable and improving delinquency, lower cost of acquisitions and improving yields, as well as declining share count, all of which ultimately returns value to our shareholders through strong earnings per share growth. At this time, Johnny Calmes, our Chief Financial Strategy Officer, would like to open up to any questions you have.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. And the first question today will come from Kyle Joseph with Stevens.